When China invades Taiwan: Where to Stocks and Bonds?

[Garpal Gumnut]

I was running some scenarios with the yardman from the hotel last night and the small matter of Wolf Diplomacy by the Chinese cousins came up. I believe the CCP recently enjoined their hapless Ambassador in Canberra to front a movie worthy of a sixpenny seat in the stalls in the 1950's. From the description I received second-hand it was full of colour, happy peasants, flag waving and the glowing healthy faces of some Turks who inhabit a province of China. Its motive was to belie the bad press about the treatment of said Turks. I believe they are called Uyghers.

These performances have some parallels in history, prior to war being declared.

I believe Mao was more than miffed when the Nationalists fled to Taiwan after they lost the civil war post WW2. So it is not without possibility that the grandchildren of his generation in China may wish to regain Taiwan as part of its imperialist ambition. Could this be the start of the beginning ?

Which takes me to stocks and bonds.

I am hopeless at predicting their value in to the medium future. Thus I seek the combined wisdom of ASF members on this important matter to me.

Where to International Markets, the ASX and Bonds when China invades Taiwan ?

gg

 

[tech/a]

I know a few Taiwanese and they believe its not a matter of will but when.

If that did occur I dont think it would be limited to China and Taiwan.
As to bonds and the ASX ---I wont be caring about either!

 

[Sean K]

A few examples:

 

[Dona Ferentes]

How often over the past decades have we been warned that the Taiwan Strait is a potentially explosive flashpoint? Often enough to numb the mind. So why should we pay attention this time? Because the pivotal reason that peace has endured for 70 years has disappeared. Unlike his predecessors, Xi Jinping, President of the People’s Republic of China (PRC), is no longer prepared to leave unification of the mainland and Taiwan to future generations.

Xi has not only proclaimed that he wants to oversee movement toward unification during his lifetime, he has also repeated his predecessors’ message that Beijing will not renounce the use of force to attain its goal. These threats are credible. Unification is central to the legitimacy of the Communist Party of China (CPC) and to Xi’s vision of the ‘China Dream’...

Policy Brief February 2021 - China Matters

chinamatters.org.au

..... maybe buy pot stocks, because everything is likely to go up in smoke?

 

[Sean K]

 

[Dona Ferentes]

sorry about (lack of) clarity

 

[Sean K]

I'm not sure if they can invade. Still not enough amphibious ships.

Plus, Quad and (some of) Nato won't let it happen, unless completely distracted elsewhere. Maybe Russia and Iran will create a diversion.

UK, France and Germany all sending ships into the Sth China Sea this year.

 

[ducati916]

Looking at the earlier charts above, war is inflationary. Second, you never know who will actually win. Third, China is no Iraq. Fourth, China has categorically stated Taiwan is their's, I don't see them backing down on that.

Gold. It owes allegiance to no government.

BTC could get caught up in a cyber-war as part of a general conflict.

jog on
duc

 

[qldfrog]

From my Chinese limited experience, I agree it is a matter of when, not if.
And while many here will still hate Trump in their afterlife, as long as Trump was around, his supposedly irrational behaviour was keeping Taiwan safe;
With Biden, all that is gone and Xi is now sure he can use force without any military response of huge amplitude: no all out war;
As for Europe, it is now a toothless mangy kitten.
https://www.dw.com/en/brussels-chides-turkey-on-sofagate-von-der-leyen-snub/a-57124353
should I say more?
As for the French or UK fleets: ROL or ROC... for Crying...


So is Xi willing to actually play the hard side or can he just let the west self sinking itself at an unprecedented speed?
Remember Chinese leader do not have a poll deadline so they can wait as long as their population still has growing wealth and is happy, and they are.
When this stops for any reason is when Taipei can start heading for the bomb shelters.

Note: I am no strategist

 

[Garpal Gumnut]

Thanks @kennas . That att. above showing a 20% drawdown in the DJIA after Pearl Harbor is the one that caught my eye.

So I guess to be conservative, a 40% drawdown should the West win and a brush up on my Mandarin should we not.

gg

 

[sptrawler]

My off the cuff guess is that an invasion is expected and the chip manufacturing is currently being dismantled, leading to the shortage.
But I do love conspiracy theories. ?
My suggestion @Garpal Gumnut , is to get a chip manufacturing plant going at the Ross Island resort, to go with the plentiful fish.
As the chip shortage will have a detrimental affect on far North Queensland, due to the fact it has very little going for it, other than your pearls of wisdom and great fishing.

 

[sptrawler]

And while many here will still hate Trump in their afterlife, as long as Trump was around, his supposedly irrational behaviour was keeping Taiwan safe;

That is the key, no one likes playing Russian roulette with a loony, China now know that period is over IMO.
Hence the U.S plan Biden, dismantle the chip manufacturing ASAP, then get the hell out of there.
Just my opinion. but I would expect to see an increase in U.S chip manufacturing, because after Taiwan, one would expect South Korea to come into play.
I certainly hope not, but an ever increasing economy in a gigantic country under totalitarian control with a regulated currency, I can't see any limitations to their ambitions.
I don't think the PC crowd saying "aw play fair", is going to cut it, but hey you never know they have achieved heaps in Australia.

 

[basilio]

If this does end up in a shooting war I wonder what the effect will be on the intertwined economies of China and the rest of the world.
For instance how much US bonds does China hold ? What happens to the trade in iron ore from Australia to China ? What would be the effect on world computer chip supply if Taiwan companies were put out of commission ?

I also can't see how there will be "controlled" war. What happens if/when a US capital ship ie aircraft carrier is attacked and sunk ? The grim reality is that on all the war gaming scenarios played out by the US military they get soundly beaten. I suspect that to "win" such a war the US would have to go nuclear - and that spells the end of all stock markets (not to mention everything else..)

War games suggest the US will lose fast if it confronts China

The US Air Force simulated a war game against China last autumn, and the results were unsettling for Washington.

www.trtworld.com

Wargames: Losing Is Learning, Learning Is Winning

It is imperative the U.S. military learns from wargame losses.

thediplomat.com

 

[sptrawler]

If this does end up in a shooting war I wonder what the effect will be on the intertwined economies of China and the rest of the world.
For instance how much US bonds does China hold ? What happens to the trade in iron ore from Australia to China ? What would be the effect on world computer chip supply if Taiwan companies were put out of commission ?

I also can't see how there will be "controlled" war. What happens if/when a US capital ship ie aircraft carrier is attacked and sunk ? The grim reality is that on all the war gaming scenarios played out by the US military they get soundly beaten. I suspect that to "win" such a war the US would have to go nuclear - and that spells the end of all stock markets (not to mention everything else..)

War games suggest the US will lose fast if it confronts China

The US Air Force simulated a war game against China last autumn, and the results were unsettling for Washington.

www.trtworld.com

Wargames: Losing Is Learning, Learning Is Winning

It is imperative the U.S. military learns from wargame losses.

thediplomat.com

Well it would certainly put climate change and electric vehicles on the back pages of the newspaper.

 

[bux2000]

And on a lighter note......​

​

Kim Jong Un was sitting in his office wondering whom to irritate next when his telephone rang.​

"Hallo, Mr. Kim!", a heavily accented voice said. "This is Paddy down at the Harp Pub in County Sligo, Ireland. I am ringing to inform you that we are officially declaring war on you!"

"Well, Paddy," Kim replied, "This is indeed important news! How big is your army?"

"Right now," said Paddy, after a moment's calculation, "there is meself, me cousin Sean, me next door neighbour Seamus, and the entire dart team from the pub. That makes eight!"

Kim paused. "I must tell you, Paddy, that I have one million men in my army waiting to move on my command."

“Jesus" said Paddy. "I'll have to call you back!"

Sure enough, the next day, Paddy called again. "Mr. Kim, the war is still on! We have managed to acquire some infantry equipment!"

"And what equipment would that be, Paddy?" Kim asked. "Well, we have two combines, a bulldozer, and Murphy's farm tractor."

Kim sighed. "I must tell you, Paddy, that I have 16,000 tanks and 14,000 armoured personnel carriers. Also, I've increased my army to 1-1/2 million since we last spoke."

"Holy shite!" said Paddy. "I'll get back to you."

Sure enough, Paddy rang again the next day. "Mr. Kim, the war is still on! We have managed to get ourselves airborne! We've modified Harrigan's ultra-light with a couple of shotguns in the cockpit, and four boys from the Shamrock Pub have joined us as well!"

Kim was silent for a minute and then cleared his throat. "I must tell you, Paddy, that I have 10,000 bombers and,10,000 fighter planes. My military complex is surrounded by laser-guided, surface-to-air missile sites. And since we last spoke, I've increased my army to TWO MILLION!"

"Ah bollix!", said Paddy, "I'll have to ring you back."

Sure enough, Paddy called again the next day. " G’ mornin' Mr. Kim! I am sorry to tell you that we have had to call off the war."

"I'm sorry to hear that," said Kim "Why the sudden change of heart?"

"Well," said Paddy, "we've all had a long chat over a lot of pints, and decided there's no feckin way we can feed two million prisoners."

 

[Smurf1976]

Looking at the earlier charts above, war is inflationary.

I'd think that would be especially so in terms of the price of manufactured goods when the war involves a country that makes rather a lot of stuff.

Versus if the war was in some place that didn't have that attribute then there'd be less of an impact.

 

[qldfrog]

I'd think that would be especially so in terms of the price of manufactured goods when the war involves a country that makes rather a lot of stuff.

Versus if the war was in some place that didn't have that attribute then there'd be less of an impact.

Very seriously, how long do you think our country could run without China?
Our sewerage and power systems, the factories and farm/mines
Any microprocessor, resistor, led, any electric motor or switch, etc etc
With covid, 1y down the path and we still can not build 3ply paper masks...

 

[sptrawler]

I'd think that would be especially so in terms of the price of manufactured goods when the war involves a country that makes rather a lot of stuff.

Versus if the war was in some place that didn't have that attribute then there'd be less of an impact.

I think Whyalla is an indicator as to the anxiety.

 

[basilio]

Well it would certainly put climate change and electric vehicles on the back pages of the newspaper.

Be the least of our worries wouldn't it ?

 

[sptrawler]

Very seriously, how long do you think our country could run without China?
Our sewerage and power systems, the factories and farm/mines
Any microprocessor, resistor, led, any electric motor or switch, etc etc
With covid, 1y down the path and we still can not build 3ply paper masks...

It is a small economy and population, it wouldn't be difficult to transition from ebay.
Two generations ago people survived without the $hit, people adapt, hungry is hungry, play station gets relegated to where it belongs. ?
Bring it on IMO, a dose of reality is what's needed, way too much it's hard I don't like it, make it easier.